Question

What would you be willing to pay for a $1000 par, 7 1/2% coupon bond with 25 years until maturity if you wanted to earn a return of 8%

Answer 1

$958.78

Step-by-step explanation:

The computation of the present value is shown below:

Given that

Future value = $1,000

NPER = 25

PMT = $1,000 × 7.5% = $75

RATE = 8%

The formula is shown below:

= -PV(RATE;NPER;PMT;FV;TYPE)

After applying the above formula, the present value is $958.78

The same is to be considered